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June 5th Rate Cut and How It Helps Your Wallet

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How the Bank of Canada’s Interest Rate Cut Works for You

The recent interest rate cut by the Bank of Canada has the potential to revolutionize your financial situation. This move, the first since March 2022, represents a pivotal moment in the central bank’s fight against inflation. Canada’s proactive stance as the initial G7 nation to slash interest rates amidst a global inflation combat is significant.

Here’s a breakdown of how these changes can impact you as a current homeowner, prospective homebuyer, or investor:

For Current Homeowners:

  • Reduced Monthly Mortgage Payments: Homeowners with variable rate mortgages can anticipate a decrease in their monthly payments following the rate cut. For instance, a 0.25% rate reduction on a $500,000 mortgage is equal to $75 in monthly payments. ($15 for every $100,000 of mortgage)
  • Enhanced Refinancing Opportunities: Lower rates create favorable conditions for refinancing. Refinancing could lead to substantial savings if your current mortgage rate exceeds the new rates.
  • Long-term Savings Potential: Accumulated savings over the mortgage term can be significant. Over the life of your mortgage, these savings add up. For a $500,000 mortgage over 25 years, reducing your rate by just 0.25% could save you nearly $35,000 in interest.

Strategies to Optimize These Advantages:

  • Rate Comparison: Engage your mortgage broker to explore various lenders and secure the most competitive rate.
  • Fixed vs. Variable Rates: Evaluate which option aligns better with your financial circumstances.
  • Securing Low Rates: Act swiftly to lock in a low rate to shield yourself from potential rate increases.

Impacts on Investors:

  • Favorable Borrowing Environment: Lower borrowing costs empower investors to finance or refinance properties more affordably, enhancing profitability and investment returns.
  • Potential for Increased Returns: Reduced interest expenses can boost cash flow from rental properties. For example, refinancing a 500,000 investment property from 6.7% to 6.45% reduces the payment by $75 monthly, augmenting your net income.

Insights on Market Stability:

  • Interest rate cuts typically inject vitality into the real estate sector, fostering stable or appreciating property values. Monitoring these developments can aid in making sound investment choices.

The next Bank of Canada interest rate announcement is on July 24th

Make sure you stay ahead of the game and make the most of these changes. Our experienced team is here to walk you through these shifts and make sure you get the most out of them. Don’t hesitate to get in touch with us today to see how these changes can work in your favour.